Editor's Corner: Shareholder activism going global Also Noted: Spotlight On... Investment banker: Large deals ahead News From the Fierce Network:
Today's Top News1. Morgan Stanley to raise sustainability fund
Big banks have embraced various efforts designed in part to burnish their brands as well as to do good things for society. Some of the most-publicized efforts so far revolve around social-impact bonds and how they might be used to solve vexing social issues. In a similar vein, Morgan Stanley has announced the establishment of the Morgan Stanley Institute for Sustainable Investing. Audrey Choi, who leads Morgan Stanley's Global Sustainable Finance group, will be the inaugural CEO of the institute. The goal is to "build on Morgan Stanley's ongoing work to advance market-based solutions to economic, social and environmental challenges, operating from the foundational principle that sustainable investment can only achieve significant scale by attracting a broad range of private sector capital. Through product innovation, thought leadership and scholarship aimed at expanding opportunities for sustainable investing, the Institute will seek to drive capital toward investments promoting sustainable economic growth," the company said in a statement. The bank also said it will aim to raise $10 billion from clients over the next five years, with an eye on meeting "rapidly increasing client demand for opportunities to invest for positive environmental and social impact in addition to the goal of achieving risk-adjusted financial returns." We can only hope the returns are strong enough to justify more activity of this ilk. Morgan Stanley also pledged $1 billion for affordable housing projects in various communities. Read more about: Morgan Stanley
2. Wells Fargo settles with FHFA
Recall that in 2011, when the FHFA sued 17 companies for misrepresentation of mortgage quality, Wells Fargo was exempted. The bank's reprieve "came about because lawyers had already entered into discussions about settling the case," according to the Financial Times. The issue fell to the back burner, but now that the regulator of the big housing GSEs is having great success in settling with other banks, it has quietly struck a deal with Wells Fargo as well. Media reports hold that the company and the FHFA have settled for less than $1 billion. That compares with the $5.1 billion settlement that JPMorgan Chase has agreed to pay in principle. A deal with Bank of America is also in the works; speculation holds that the bank will pay in the neighborhood of $6 billion. "Unlike the allegations against banks including JPMorgan, the claims against Wells did not involve fraud. This has reduced the demands from the government in the case against Wells and similarly-placed companies." Wells Fargo's deal is covered by a confidentiality clause that has led to a dearth of specific information. Some specifics could be forthcoming in a quarterly filing with the SEC soon. For more: Read more about: Wells Fargo, settlement 3. Pensions fare well with private equity over long-term
For all the political angst over private equity, we've seen very few public pensions move dramatically away from investing in these funds. And for good reason. According to a new industry-backed study, the long-term returns have been solid. Over the past decade, private equity has delivered a 10 percent median annualized return for 146 public pensions that manage more than $1 billion, concludes a report from The Private Equity Growth Capital Council, as noted by CNBC. By comparison, pensions earned a 6.5 percent annualized return on their total portfolios over the same period. Private equity outperformed other investments, including equities (5.8 percent), bonds (6.6 percent) and real estate (6.7 percent). The big winner was the Massachusetts Pension Reserves Investment Trust Fund, which earned an enviable 15.4 percent annualized returns over 10 years. Other top earners were the Teacher Retirement System of Texas (15.5 percent), the Houston Firefighters' Relief and Retirement Fund (13.6 percent), the Minnesota State Board of Investment (14.4 percent), and the Iowa Public Employees' Retirement System (14.1 percent). It's fair to say that the returns picture can change when you consider other time frames. You can slice the data just about anyway---and come up with any result. It's also fair to say that more pensions are of a mind to tinker just a bit with the traditional investing model. One idea that has gained a bit of traction: direct investment. But these sorts of moves are more of a diversification play. None are really bent on eliminating private equity as a core holding. For more: Read more about: pensions, Private Equity Returns 4. Probe of JPMorgan's "princelings" hires spreads
In an SEC filing, JPMorgan Chase revealed that it is the target of no fewer than eight federal investigations. One of those investigations appears to have spread. The investigation started with a critical look at JPMorgan's decisions to hire the sons and daughters of important government officials in China. The probe, according to DealBook, has now spread to other parts of Asia, including South Korea, Singapore and India. "That scrutiny comes after JPMorgan itself flagged those countries for further review." That's a sure sign that the bank is cooperating, which is a wise move. The bank is surely bent on winning lenient treatment if this turns into a full-on FCPA case. Cooperation can certainly help in terms of penalties. It would have been better if JPMorgan turned itself in. If it can show that it is committed to strong FCPA compliance with its Asia units, that would be better still. As of now, we don't know just how serious this is. "Either way, though, the global focus signals a fresh challenge for the bank and an escalation of the inquiry." At issue is whether the bank was overtly trying to win government business with specific hires. "So far that link is unclear in the JPMorgan case. Yet, according to interviews, along with a review of securities filings and news reports, JPMorgan employees in Asia pinpointed the advantages of hiring the officials' children. In an internal document, the interviews show, the employees linked the hires to the 'revenue' that JPMorgan obtained from companies run by those same officials," the article notes. The bank will no doubt try to settle this as soon as it can get its ducks lined up. Some might think it has "deferred prosecution" written all over it. For more: Read more about: Enforcement Action, JPMorgan Chase 5. SAC settlement to be inked Monday
It was no secret that SAC Capital and federal prosecutors were close to a deal. Now, they have apparently resolved all outstanding issues and are ready to formalize a settlement. CNBC reports that the two sides will sign the official documents on Monday. But that doesn't necessarily mean that all the issues have been put to bed. The deal must still be approved by a judge, and that isn't necessarily fait accompli. As of now, there are some specifics of the settlement that have remained under wraps. The biggest mystery remains how much guilt SAC Capital will admit. It's clear that the Justice Department has prevailed in its efforts to force the hedge fund firm to admit guilt to at least one count of fraud, but it's unclear exactly what count that will be. According to the New York Post, the lawyer for a class-action suit over SAC's trading in Elan has already written to the federal judge Laura Swain objecting to the notion that the firm will not be admitting guilt in regard to alleged insider trading of Elan shares. "A plea on those terms, if tendered, should be rejected," the letter said. To be sure, judges have recently been quite critical of financial services settlements that were deemed inadequate for various reasons. Not admitting to any guilt has certainly been an issue, one that has prompted federal prosecutors to change their long-standing policies. They will now seek admissions of guilt, which certainly complicates the settlement negotiation process. All in all, one might think that any sort of SAC Capital admission will be seen as a breakthough, making it more likely that the deal will win approval. For more: Read more about: insider trading, SAC Capital Also NotedSPOTLIGHT ON... Investment banker: Large deals ahead Jimmy Lee, the top investment banker at JPMorgan Chase who advised Dell, is bullish on other large deals in the near future. He says another $25 billion deal or buyout would be easy to consummate in the current environment. "Deals have gotten bigger here in the U.S., there's been more of them, and I do think that there's going to be more very large transactions going forward," Lee was quoted by Bloomberg. Article Company News:
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Monday, November 4, 2013
| 11.04.13 | Pensions fare well with private equity over long-term
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